Seven Lesson to Teach Your Children on Money
An interesting article I found doc thought I'd share with you all: https://www.thisismoney.co.uk/money/saving/article-7132807/Seven-lessons-plan-teach-daughter-money.html
This weekend marked my first father's day as a parent – and saw my daughter tick over the seven-month-old mark.
Now, seven months might be a trifle young to start imparting financial wisdom, but I have been thinking more this week about how important it is to teach her about money as she grows.
'I wish that I knew what I know now, when I was younger,' as the evergreen Rod Stewart sings, although I don't think he was talking about money.
It is especially topical given we just had 'My Money Week.' In a nutshell, this is a week aimed at primary and secondary school children to help them gain skills, knowledge and confidence when it comes to money matters.
Money is a topic which many see as taboo – much of that stems from a lack of openness between parent and child and financial education at school (although, strides have been made to correct this in recent years).
In fact, a recent survey by Lloyds Bank found half of Britons believe talking about money is a taboo, more so than politics, religion and sex.
Now, in some ways, I can understand this – it's crass to boast if you have too much, and sometimes embarrassing to discuss if you believe you have too little.
Never too young...
Money habits are learnt early in young children, according to studies by the University of Cambridge.
By the age of seven, several basic concepts have developed - such as counting, giving and receiving, as well as differentiating between 'wants' versus 'needs'.
Maybe seven months-old isn't too young after all!
What will/have you taught your children about money? Let us know in the comments section below.
However, what is clear is the younger generation are keen on more financial help.
Almost nine in 10 of those classed as Generation Z (aged 16 to 21) say they want more help when it comes to their finances, according to a survey by BMO.
It found half of this age group would appreciate financial education around investing money and a similar number would like help with saving methods.
Other areas of particular interest are: buying or selling property, understanding financial jargon and getting out of debt – all worthy topics, although the last one really should read 'how to not get into debt in the first place.'
What I will be teaching my daughter over the years?
Here are seven lessons I will be giving her, with the aim of not overburdening, but giving food for thought as she grows up:
Wise words: 'I wish that I knew what I know now, when I was younger,' sings Rod Stewart (pictured) - for me, that definitely applies to money +3
Wise words: 'I wish that I knew what I know now, when I was younger,' sings Rod Stewart (pictured) - for me, that definitely applies to money
- Always be open about finances
As mentioned above, sometimes money is seen as a taboo subject. When I was 10, my parents divorced and it resulted in our house being repossessed.
What I'll never forget, however, is how closed off our dire financial situation was to me.
My parents probably thought they were protecting me and my innocence, but I would have much rather have known what was unfolding, even at that age.
With my daughter, I will be open – and talk about incomings and outgoings, how we manage money, the importance of keeping on top of bills, while saving for fun things such as holidays.
In return, I will tell her to always come to us with her money worries - and never shy away from the subject. No question is ever too daft.
- The art of saving
Expanding on that point is the art of saving some, or lots, of what you earn – and why it is important to save for things you want, rather than relying on credit.
For my daughter to do some saving, she'll need to get some money - and earning it seems a good idea.
The simplest way of doing this will be for my wife and I to pay her to do simple chores, which she can then choose to save – or spend – with guidance on how best to do it.
This will come along with information about interest (bank of mum and dad will probably offer a five per cent rate, rather than what is offered on the high street) and why getting in the habit is far more important.
Art of saving: Interest rates are low - but getting in the habit is vital even for the very young (pictured posed by model) +3
Art of saving: Interest rates are low - but getting in the habit is vital even for the very young (pictured posed by model)
- The magic of compounding
Those who listen to our podcast (you can do so below) may know I have a target to save £50,000 for my baby for when she turns 18.
However, before telling her about the money – or handing it over (I have full control, I didn't open a Junior Isa, but a stocks and shares Isa with my own allowance) I will sit down and give her a full lesson on compound interest, as that will make up a huge chunk of that pot.
That might give me the title of uncoolest dad on planet earth – but I wish I knew more on the subject when I was 18. A perfect conversation for a wet and boring afternoon.
- Don't be afraid to invest
On top of the above, I wish I knew more about investing and it appears a large chunk of under 21s would like to do so too.
Until my late-20s, I didn't like the thought of investing, and I reckon the large majority feel the same.
Having worked hard to finally start earning an okay salary, I didn't want to see any savings disappear.
I will explain to her the Vanguard Lifestrategy 100 per cent equity fund that I opened years before, what it was invested in, why investing is usually the best option over the long-term, and never be afraid to get involved, by talking through the peaks and troughs.
- Property is not your pension
When my daughter starts working – whether that it is straight from school, or after perhaps going to university - I will hammer home the need to start saving a neat chunk into a pension.
Why it is best to start young and crunching sums to highlight this, why she should engage and diversify – and crucially, to not fall into the trap that property is far more important.
Many younger people may be thinking this now, especially given confusing products such as the Lifetime Isa.
- Jargon is there to baffle
A simple one – but jargon is one of the biggest barriers to financial education. Start spitting out APRs, TERs, ISAs and so-on, and the shutters may come down.
Cut through it – explain what these baffling acronyms are in a simple way – and it could make your child thousands better off, as they won't be put off acting to make the most of their money.
- Ignore the credit card temptation
One piece of advice my mum gave me as I started university was to get a credit card: 'for emergencies and to help build a credit rating.'
The advice was given with the best intentions, but I won't be making the same mistake dishing out similar to my daughter.
The temptation to spend is all too real, especially in your late teens and early 20s and can lead to a spiral of debt. It's much better to save for what you need or want, then pay now, worry later.
In terms of credit rating: well, paying for items such as monthly mobile phone, and other bills, are more than likely to plug the gap of what is a crazy system.
Get a credit card to build a rating to borrow more, such as to buy a house – hopefully by 2036, when my daughter is 18, we'll look back and think how mad that notion truly was.
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